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Note on the Political and Economic Situation Of DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B - POLICY DEPARTMENT - NOTE ON THE POLITICAL AND ECONOMIC SITUATION OF BRAZIL AND ITS RELATIONS WITH THE EUROPEAN UNION Contents: Over two years since President Luís Inácio da Silva, known as "Lula", came to power, the economic policy of the Brazilian government has reassured national and international economic sectors, but 59 million Brazilians still live on less than two dollars a day. President da Silva secured a second term in a landslide election victory in October 2006. He promised to boost economic growth and to narrow the gap between rich and poor. But with a weakened presence in congress, his left-wing Workers' Party have to rely on political alliances to pursue planned tax, social security and political reforms. With regard to EU/Brazil relations, talks on the EU/Mercosur association agreement are still, unfortunately, at an impasse. Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament FOR EUROPEAN PARLIAMENT INTERNAL USE ONLY DGExPo/B/PolDep/Note/2007_200 October 2007 EN DMER/NT/692067ES PE 397.081 This note was requested by the European Parliament's Delegation for relations with Mercosur. This document has been published in the following languages: English Author: Pedro Neves Manuscript completed in October 2007. To obtain copies, please contact: [email protected] Brussels, European Parliament, October 2007 Sources: Economist Intelligence Unit (EIU) European Commission Eurostat Global Insight Oxford Analytica Reuters DMER/NT/692067 PE 397.081 2 CONTENTS Page I. POLITICAL SITUATION ...................................................................................................4 II. ECONOMIC SITUATION.................................................................................................16 III. EU/BRAZIL RELATIONS.................................................................................................23 ANNEXES DMER/NT/692067 PE 397.081 3 I. POLITICAL SITUATION 1. Introduction Brazil is the largest country in South America, covering around half of the total surface area of the subcontinent. It shares borders with every other South American country except Chile and Ecuador. The surface area of the country is 8 547 000 km2 (16 times that of France). The large highland region, known as the ‘Brazilian plateau’, and the Amazon basin are the main topographical features of the country. The highland region – an eroded plateau – takes up most of the southern half of Brazil. The basin of the Amazon in the north takes up a third of the country’s surface area. This land is covered in tropical rainforests, the Amazon forest, which are very much the ‘lungs’ of the planet. The population of Brazil is estimated at 189 million. Over 81% of the population is urban. The different ethnic groups can be broken down as follows: 55% are whites of European descent, 22% mulattos of mixed European and African descent, 12% mestizos of mixed European and Native American descent, 11% blacks and only 0.1% Native Americans. Brazil ranks fifth in the world in size and population. The federal capital is Brasilia, while the most important cities are São Paulo and Rio de Janeiro. 2. Historical background Discovered in 1500 by the Portuguese, Brazil gained independence in 1822. It became a republic in 1889 after a military coup d’état that brought an end to the constitutional monarchy (the Empire). The republican constitution, which was proclaimed in 1891, was in force until 1930, the year in which the economic depression and regional rivalries resulted in the military intervention which brought the populist Getúlio Vargas to power. After his fall, the country went through an ephemeral period of democratisation for, in 1964, a new military coup d'état took place. An authoritarian, even dictatorial regime took power until 1985. However, during the final years of the dictatorship, the armed forces encouraged the transition to democracy, holding free elections which were won by the opposition (Brazilian Democratic Movement – MDB), and subsequently ceding power to civilian authorities. The adoption of a new constitution and a return to universal suffrage led to a new period of democracy. But the economic crisis, which had begun with the ‘lost decade’ of the 1980s, worsened in the early 1990s under President Fernando Collor de Mello, with the annual inflation rate reaching 1 150 %. Industrial production collapsed, unemployment rose and poverty levels grew. The economic programme pursued by Itamar Franco (the successor of Collor de Mello, who had been removed due to corruption), published in April 1993 and implemented by the then Finance Minister, Fernando Henrique Cardoso, stimulated renewed growth by accelerating privatisations and combating tax evasion, to the benefit of farmers and the poorest strata of the population. Nevertheless, immense regional, ethnic and cultural disparities persisted and made Brazil one of the most inegalitarian countries in the world. Some of these disparities were a legacy of the DMER/NT/692067 PE 397.081 4 colonial past, while others had been aggravated during the recent periods of economic development (1930-1980). Unfortunately, the "New Republic" which followed has not yet succeeded in significantly improving the situation of the country's citizens. 3. Domestic politics 3.1. Institutional framework Brazil is a federative republic made up of 26 states (United States of Brazil) and the federal district of Brasilia. In 1960, the government decided to build the city of Brasilia in the interior of the country, declaring it the capital to create a demographic and economic balance within the country. The country’s return to democracy in 1985 was given an institutional boost by the 1988 constitution, which was considered by analysts to be highly forward-thinking. The president, who is head of the executive, is elected by direct universal suffrage for a term of four years, and can be re-elected once. The president’s term of office can be interrupted in the event of death, resignation or criminal proceedings. In such a case, the vice-president takes over the interim until there are fresh elections. Former President Fernando Henrique Cardoso strengthened the role of the executive, for although he enjoyed a majority in Congress, he often governed by means of ‘temporary measures’, decrees which, with the consent of Parliament, were made permanent, thus in practice becoming new laws. On 15 August 2001, Congress passed an amendment to the Constitution limiting the president’s use of ‘temporary measures’. The legislative system is bicameral and Congress (Congresso Nacional) is made up of the Senate (Senado Federal) and the Chamber of Deputies (Câmara dos Deputados). Representatives of the legislative body are elected at local level in the federal states and the federal district. Each of these is represented by three senators, elected for eight years and the elections are staggered. The Senate has 81 members, some of whom are replaced every four years. The number of deputies elected per state (elected for four years) varies according to population. The current Chamber of Deputies consists of 513 members. Regional government reflects the federal system. Executive power is exercised by a directly elected governor, while legislative power is held by a single chamber. Relations between the federal government and the regional governments have at times been strained, as, since 1998, the latter have held all the powers not attributed to the federal government in the constitution. It should be pointed out that each state has its own Court of Justice, whose status and competencies are laid down in the constitution to avoid any risk of a conflict of jurisdiction or of a different interpretation of national laws by individual states. The Supreme Court is made up of 11 judges appointed by the president after approval by the Senate. After 13 years of parliamentary debates, Congress promulgated the reform of the judicial system on 8 December 2004, which provided for the creation of mechanisms for external control of the judiciary. The most controversial point was the creation of a National Justice Council (CNJ), the objective of which was to control the activities of the courts and their budgets. DMER/NT/692067 PE 397.081 5 The liberalisation of the political climate in the 1980s led to the creation of some 40 political parties. The most important parties remain, however, the Workers’ Party (PT), the Party of the Brazilian Democratic Movement (PMDB), the Brazilian Social Democratic Party (PSDB), the Party of the Liberal Front (PFL), the Progress Party (PP), the Brazilian Labour Party (PTB) and the People’s Socialist Party (PPS, the name of the Brazilian Communist Party since 1992). At first sight the political system appears to be extremely fragmented, but in practice it consists of two coalitions, one pro-government and the other in opposition. In his two terms of office, President Cardoso enjoyed a majority in Congress and was able to see through the vast majority of his proposals. Party affiliation can often be quite loose. In order to avoid the political "transfuguismo", the Supreme Court adopted an important ruling on 5 October 2007, which if implemented, is to set an end to the chronic party-switching that has long fuelled instability in the legislature. Under the decision, which upheld a March ruling by the Tribunal Superior Electoral
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